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New Hampshire stands at the threshold of a bright new future. We are as well positioned as any state to lead the country in innovative economic growth that will lift all of our people and define the 21st century.

In recent years, our people and our state have faced immense challenges. The recession has left no family, no business, no community unaffected.

And though there are still challenges to address, today we can say confidently that New Hampshire has emerged in a better position than most other states.

But we cannot sit back and wait for the innovation economy to develop.

We must lead the way.

Now is the time for New Hampshire to choose our own path forward, to build the foundation for a stronger, more innovative economic future that harnesses the greatness of our people and allows all of our citizens to succeed.

Today I present to you a balanced budget - with no income or sales tax - that is fiscally responsible and focused on innovation, economic growth, and creating good jobs to support a strong middle class.

A budget that begins rebuilding, based on the priorities that are critical for an innovative future: ensuring that all of our people can receive an education and develop skills for good jobs, attracting and growing cutting-edge businesses, and sustaining our high quality of life by keeping our communities and people safe and healthy.

It is a budget that reflects what I have heard from communities, families and businesses across New Hampshire, and from so many of you here in this room.

But it is also a budget that recognizes that we cannot address all of our challenges all at once in these uncertain economic times. We must still make difficult choices to protect our priorities while living within our means.

Let me take a moment to thank our dedicated department heads and all of our state employees, who have worked so hard to serve our citizens well in difficult times.

In preparing this budget, we cut agency budget requests by more than 500 million general fund dollars, keeping general fund spending seven percent below fiscal year 2008 for fiscal year 2014.

At the same time, our budget includes only two percent baseline revenue growth in the first year of the biennium and 1.9 percent in the second. These conservative projections were made with the guidance of our Consensus Revenue Estimating Panel, a nonpartisan group of experts who have volunteered their time to help ensure that our revenue estimates are as accurate and reliable as possible – to members of the panel, thank for your service. Revenues are also reduced moving forward as we begin to reverse the significant tax increase made in the last biennium on our hospitals.

In addition to slow revenue growth, we were forced to address a deficit for fiscal year 2013, caused by shortfalls in Medicaid Enhancement Tax revenues, as well as unrealistic saving estimates for the implementation of Medicaid Managed Care and the changes to the retirement system. This budget balances 2013 through the use of surplus dedicated fund revenue and by working with agencies to continue to delay spending and increase their lapses.

Slow revenue growth made the task of balancing the budget more difficult.

But by making tough, fiscally responsible choices, and by encouraging new innovations to make government more efficient, we have been able to balance the budget while making critical investments in public safety, higher education, economic development, and health care.

The budget I present to you today puts New Hampshire back on the path to a strong and innovative economic future.

First and foremost, to attract the innovative businesses and good jobs that will drive our economy forward, we must ensure that our workforce is the strongest in the nation by making higher education more affordable and more accessible for all of our people.

Nearly every business I have visited has told me that a skilled workforce is critical to their ability to grow. Many are ready to hire right now but are having trouble identifying the workers they need. Others have partnered with our colleges and universities to build a workforce pipeline themselves, with numerous innovative programs across our state.

The Energy Services and Technology program at Lakes Region Community College is giving students hands-on training for jobs in a rapidly expanding field.

The partnership between Great Bay Community College and Albany/Safran in Rochester helped attract these high-tech manufacturers to our state, where they will create 400 or more good jobs.

The dynamic Regional Center for Advanced Manufacturing at Keene State is giving students experience with some of the most innovative technologies available today, such as three-dimensional printing and high-precision cutting devices.

And I have visited businesses throughout the state, like Hypertherm in Lebanon, Globe Manufacturing in Pittsfield, and Nanocomp in Merrimack, that need workers with the right skills.

New Hampshire will not be able to help these businesses grow or attract new companies if we do not demonstrate that we are serious building the skilled, educated workforce that businesses need to compete.

The drastic cuts made to higher education in the last budget have hurt our ability to train a highly skilled workforce and to give our people the bright future they deserve.

Our students and families face one of the highest in-state tuition rates for public universities in the country. The price for classes at our community colleges is also prohibitively expensive for many working students.

And I have too often heard stories like the one told to me by a woman in Londonderry, whose daughter went to UMass Lowell because Massachusetts’ out-of-state tuition is lower than New Hampshire’s in-state tuition.

That is unacceptable.

We need to make it possible for our middle-class families to compete and share in the American dream. Ever-rising tuition rates can force many families to avoid even considering New Hampshire’s public colleges and universities, hurting our competiveness. If we hope to encourage job creation and innovative economic growth, we cannot keep losing our young people or fail to develop our workforce.

That’s why our budget substantially restores the cuts made to our community college and university systems. The University System will receive an increase of $20 million in fiscal year 14 with an additional increase of $15 million in fiscal year 15, bringing the system back to 90 percent of where it was before the cuts.

And we have not only fully restored funding for the Community College System in the first year, but added $3 million in the second.

In exchange, the leadership of both the community college and university systems have assured me they will go to their boards with a plan to freeze tuition for the next two years.

We also recognize the important role our private colleges play in attracting and keeping new workers. This budget includes $4 million in UNIQUE funds to support need-based scholarships that can be used at both public and private colleges.

But ensuring that our workforce is ready for the jobs of today and tomorrow also means that at each step along the way, New Hampshire’s young people must be developing the skills, knowledge, and innovative thinking needed in a 21st century economy.

This budget protects our state’s commitment to our public K-12 education system by fully funding the existing Adequacy formula. And in the second year of the biennium, this budget fully funds the building aid formula and increases catastrophic aid and tuition & transportation assistance to local schools.

In addition, this budget will help encourage innovation by providing funding to allow new charter schools to open and to allow existing charter schools to accept new enrollees.

At the same time, these charter schools have a responsibility to live within their budget, and so this budget sets new parameters and provides authority for the Department of Education to prioritize new charter school approval to underserved communities.

To help pay for these investments, this budget repeals the voucher tax credit that would have diverted millions of dollars in taxpayer money to private and religious schools with no accountability.

Our budget also seeks to bring together teachers, local schools, higher education and the business community to ensure a robust and rigorous education for all of our students, especially in the STEM fields of Science, Technology, Engineering and Math.

In an innovation economy, building skills in these fields is more important than ever and can lead to higher paying and more stable careers. We need to support engaging programs and curricula to help students understand how far they can go and how much they can accomplish if they stick with STEM education.

New Hampshire is the birthplace of one such inspiring program, FIRST Robotics, which has awakened in thousands of students an interest in science, math and technology while teaching them the valuable life skills of teamwork, collaboration and innovative thinking. This budget includes $200,000 in incentive grants for communities to launch robotics teams, because FIRST should be an opportunity available to every New Hampshire student.

Just as we need to prepare our workforce for 21st century jobs, we need to lay the groundwork and provide the support innovative businesses need to create those jobs.

Our economy is changing rapidly with growing sectors like clean energy, biotech, and IT. There are many businesses looking to expand or move to New Hampshire; existing businesses who could use targeted tax credits to develop new products; entrepreneurs who, with just a little guidance, are ready to turn a creative idea into a burgeoning business.

I have seen these stories throughout New Hampshire, and I know that our business community is ready to lead the way to a more innovative economic future – if their elected officials are ready to stand by them.

This budget doubles funding for our Research & Development tax credit to help businesses invest in new technologies that can lead to growth and job creation. The Senate has already taken action on this important measure, unanimously passing a bill that will double the R&D tax credit and make it permanent, creating more predictability for businesses. I encourage my friends in the House to do the same and make this measure one of the first bills I sign into law as Governor.

This budget also funds business incubators, like the Innovation Research Center and the Green Launching Pad at UNH, which have helped numerous entrepreneurs get their businesses off the ground. Incubators can provide needed early funding and infrastructure, but most importantly, they offer basic support and advice to guide new businesses through the most treacherous early stages – leading to stronger companies and more jobs here in New Hampshire.

This budget also recognizes that investing in travel and tourism promotion pays dividends for workers, businesses, and our economy, and so it provides for an increase in travel and tourism funding over the next two years.

Our budget also begins rebuilding our stagnating economic development efforts and revitalizing our International Trade Office to provide businesses with the technical support they need to compete. Let’s help our businesses, both new and established, enter new markets. Let’s make New Hampshire a leader in selling our services and goods around the world.

With these measures, and your ideas, together we can make New Hampshire an innovative economic leader.

Our economic success, however, will depend on our efforts to maintain our high quality of life as one of the safest states, healthiest states and most livable states in the nation. We cannot walk away from our responsibility to provide the basic services that are critical to the overall well-being of our families, our businesses, and our communities.

This includes ensuring that all of our citizens are able to live healthy, productive lives with access to quality, affordable health care.

Our state continues to experience some of the most expensive health insurance rates in the entire nation. Too many of our citizens are unable to access basic, preventive care, forcing them to wait for an emergency before seeking help.

But with the federal Affordable Care Act now the law of the land, we will have new tools to help reduce costs and improve the health of our citizens, while adding $2.5 billion to our economy.

An independent study by The Lewin Group concludes that these funds will help thousands of individuals and families access health coverage, create an estimated 700 jobs, and save Granite Staters more than $92 million.

Uncompensated care at our hospitals’ emergency rooms increases costs for everyone. By moving forward with Medicaid expansion, we can reduce that uncompensated care and save the average New Hampshire household an estimated $145 per year.

The federal government will provide 100 percent of the funding for the first three years and no less than 90 percent thereafter, and the federal government has historically fulfilled its commitments to the Medicaid program.Our budget includes Medicaid expansion; it is the right thing to do for our economy, for our state’s finances and for our families.As both Democratic and Republican governors around the nation have said, it’s a good deal, one that will, among other things, allow us to save money in existing state programs, while increasing state revenues.Under federal law, people insured through Medicaid expansion will receive coverage parity for mental health and substance abuse treatment. This parity is smart and it is right, and so this budget provides for mental health and substance abuse treatment coverage for our existing Medicaid population as well.As we implement the Affordable Care Act, which guarantees coverage to all of our people, regardless of preexisting conditions, we must also re-examine some of our existing efforts and programs. As part of that effort, this budget includes a commission to consider what type of Retirees Health Program we should offer to new employees in the future.And as we undertake Medicaid expansion, we should use this as an opportunity to work together -- hospitals, providers, insurers, state government and patients -- to find new, innovative ways to improve our health care system and health care outcomes for all of our patients.

But to maximize the potential of expansion and our health care dollars, this budget continues the implementation of Medicaid Managed Care. In order for New Hampshire to move forward, providers must continue to innovate and assist the state with managing care for our residents. Our providers must take a leadership role in Medicaid care management. Now, more than ever we need their cooperation.

I also recognize the concerns inherent with such a big change, and in the next several weeks, I will establish a commission to advise me on implementation to make sure we are protecting patients and providers.

And we need to reexamine the massive tax increase imposed by the last budget on New Hampshire’s hospitals. This has understandably put a strain on their ability to maintain their operations, and has caused a delay in implementation of Medicaid Managed Care. And it has led, in part, to the deficit we face in 2013.

Our budget begins to restore those funds by reducing Medicaid Enhancement Tax revenues to the general fund and provider payments, making more funding available for uncompensated care payments.

We must also meet our commitments to our most vulnerable citizens to ensure that they can live independently and contribute to our economy and civic life. That is why this budget fully funds the waitlists for services for people with acquired brain disorders and developmental disabilities.

And this budget begins to shore up our public health infrastructure by restoring some funding to community health centers along with vital family planning dollars.

We must also honor our responsibilities to care for and serve those who have bravely sacrificed for us: our veterans. This budget attempts to fully – and honestly – fund our state Veterans Home. And it adds an additional Veterans Services Officer to the State Veterans Council to help meet the needs of our growing number of new veterans and to ensure that they have the support they deserve.

But as we work to improve the health of all of our citizens, we must address one of our most pressing public health challenges: the need to restore our mental health system.

This budget helps us move forward with implementing the state’s 10-year mental health plan. That is critical for the safety of the public, and the health and well-being of individual citizens.

Each of us knows of someone, a friend, a family member, a neighbor who has suffered from mental illness.

Right now, many children who are suicidal are stuck for days in emergency rooms because there is nowhere else for them to go. Dozens of people are waiting on a daily basis for critical mental health care. Without proper facilities or treatment, many have been restrained or even sedated. Some leave without care at all, often putting themselves and those around them at risk of harm.

That’s not the kind of state we are.

We can all agree that our mental health system is deeply strained. And though we won’t fix all of our challenges at once, it is time to resume our efforts to repair our mental health system. We must phase in changes with a systematic approach that will strengthen all aspects of mental health care in our state and move us toward more community-based care.

And that is what this budget does. Over the next two years, it will add a new designated receiving facility to take the pressure off local emergency rooms and provide more appropriate critical treatment environments. It will add new acute psychiatric residential treatment beds, in addition to the beds at the state hospital.

And it will focus on treating people in their communities, with 75 new community residence beds, housing and support services for 100 additional people, more peer support services and assistance to older adults, and ten new Assertive Community Treatment teams to help adults and children in crisis.

While this won’t solve all of the challenges facing our mental health system, it is beyond time that we make real and meaningful investments in helping those in desperate need of care.

Supporting the health and well-being of all of our citizens also means ensuring that they can work, live, and raise their families in the safest possible communities.

But like our health care system, our public safety infrastructure took too many hits in the last two years. We need to reverse course and we need to do it now if we want to keep New Hampshire the safest state in the nation.

From mental health professionals, from parents, from educators and from law enforcement, I have heard over and over again that the loss of the Children in Need of Services program was devastating to the hopes and dreams we have for our young people and for public safety.

I appreciate the work being done by the legislature to study the program and improve these services, and this budget includes some reforms.

But we cannot neglect our duty to help those at risk and keep our communities safe, and so this budget begins to restore funding for the Children in Need of Services program.

Public safety is truly our most important responsibility, so we need to make sure we maintain the basic public safety infrastructure that allows local officials to keep us safe. Over the last few years, we have taken 30 state troopers off of our roads and out of our communities. People in our most rural areas should not have to wait more than an hour for the nearest state trooper to arrive.

To improve the safety of our people, this budget puts 15 more troopers on the road.

Our drug task force teams are also critical, supporting the efforts of small police departments to combat the growing problem of drug crimes, particularly those involving prescription drugs. But because of federal funding cuts, we were going to be forced to drop to just one drug task force team. This budget provides $500,000 per year in general funds to allow us to continue operating three drug task force teams.

Ensuring public safety also means adequately recognizing that search-and-rescue is an integral state responsibility. That’s why this budget provides $200,000 a year in general funds to pay for search-and-rescue operations at the Department of Fish and Game.

As we discuss public safety, we must also acknowledge the importance of our judicial system. Let me take a moment to recognize the hard work of Chief Justice Dalianis and the New Hampshire courts. The courts have led the way in working to become more efficient and modern. Their new state-of-the-art call center has reduced costs and improved customer service. Our courts are moving toward a paperless system, and the capital budget will allow them to continue these efforts.

But at the end of the day, we still need judges for trials and for justice. That is why this budget restores funding for two Superior Court judges.

Public safety goes beyond the dedicated work of our police, firefighters, and EMTs and beyond our judicial system.

We must ensure that our corrections system is as effective as possible, with modern facilities to keep dangerous criminals off of our streets and programs to prevent those who serve their punishment from returning to a life of crime.

For too long, our corrections system has woefully neglected women. Like our men’s prison, our women’s prison must offer facilities that can provide the programs that help individuals safely move back into society when they have served their sentences.

To ensure justice and to improve our public safety, this capital budget includes the funds necessary to build a new women’s prison. It is time, we cannot delay this any longer.

And as we strengthen and protect our communities and grow our economy, we must always preserve what has made New Hampshire such a special place to live, work and raise a family: our beautiful natural resources.

The Land and Community Heritage Investment Program has been so important for protecting our natural, historical and cultural resources, a responsibility that has not been met in recent years. That’s why this budget restores $1 million for LCHIP in the first year of the biennium, and fully restores the program in the second.

This budget also begins restoring funding for our local communities. In fiscal year 2015, this budget provides $3 million to help pay for delayed and deferred water treatment projects for communities, and increases meals and rooms distributions to communities by $5 million.

But as we make this progress, we must continue to reform state government, and this budget moves forward with efforts to make state government more innovative and efficient. It continues to consolidate the state’s office functions, such as accounts payable, and to centralize some of the human resources process.

It remakes the Liquor Commission, moving from a three-member commission to a single commissioner model.

It continues the effort to move our services in support of New Hampshire businesses into a centralized online environment through the Business One Stop. And it will move all of our boards and commissions to one licensing system, modernizing the system for the agencies and for the public.

But we need to think bigger in terms of how we best position state government for the demands of the 21st century. We must always be looking for new ways to innovate in state government in order to cut red tape and save taxpayer dollars. And we should harness the expertise of the private sector to come up with new ideas and approaches.

To encourage this process, I will soon be issuing an executive order to create a Commission on Government Innovation, Efficiency and Accountability. The commission will be charged with making recommendations to modernize state government for the 21st century, and it will include members from the business community and non-profit sector to determine how we can improve services by working together.

In addition, this budget creates the Office of Innovation and Efficiency at the Department of Administrative Services, which will lead the effort to implement commission recommendations and work with state agencies on streamlining, implementing recommendations of performance audits, and developing transparent performance measurements.

Together, these steps will help us increase efficiency and re-position state government for the future.

But we cannot balance the budget through efficiencies alone. We must identify sufficient revenue to protect our priorities and help build an innovative economic future.

Cutting the cigarette tax in the last budget has put added strain on our state and put the health of our young people at risk. New Hampshire has the highest youth smoking rate in the Northeast, with 19.8 percent of high school students who smoke cigarettes. Cigarette taxes nationwide have proven to be one of the most effective ways to prevent youth smoking, and my budget proposes reversing the cigarette tax cut and increasing the tax by an additional 20 cents, which will still keep our cigarette tax below those of our surrounding states.

In addition, the elimination of auditors and document processers at the Department of Revenue in the last budget has led to unacceptable delays in the processing of returns and refunds and cost the state millions of dollars. This budget restores some of those important positions.

In the last biennium, the legislature also made a number of promises for tax law changes, but pushed off to the next legislature the job of paying for them. Our uncertain fiscal times mean we must further delay some of those changes. This budget suspends the implementation of un-paid for tax law changes, with the exception of the increase in the net-operating-loss-carry-forward, which this budget pays for in fiscal year 15.

However, even these steps are not enough to ensure that we can responsibly invest in the priorities that will create jobs, strengthen our communities, and ensure a brighter economic future.

I know expanded gambling has been an on-going and difficult debate. But the social costs many are worried about are already here, and with Massachusetts moving forward, we can no longer pretend that expanding gambling isn’t coming to our communities. It is.

The question is: will we allow Massachusetts to take revenue from New Hampshire’s residents to fund its needs, or will we develop our own plan that will allow us to address social costs and invest in our priorities?

I believe we should move forward with one high-end casino, while at the same time protecting New Hampshire’s brand as a family-friendly state with a great outdoor economy.

The revenue from one casino would mean tens of millions of dollars a year that can be used to strengthen our economy and address our priorities, such as freezing in-state tuition and addressing our mental health crisis, as well as funds to address social costs like substance abuse and gambling addiction.

A high-end casino would also bring a significant economic boost, creating more than an estimated 2,000 jobs during construction and 1,000 long-term jobs, while attracting new businesses and economic development.

With the intense competition for casinos in Massachusetts leading to 11 applications for only three licenses, it’s clear that there is more than enough room in our region for a New Hampshire casino.

Senators D’Allesandro and Morse have introduced a bipartisan bill that serves as a good starting point for the process, and so this budget does not include legislative language authorizing a casino. I want to continue working with members of both the House and Senate to develop a final bill that addresses concerns, protects what’s special about New Hampshire, and invests in our priorities.

Though this may be difficult, I ask that you keep an open mind as we all work together to advance the priorities that will help us build a more innovative economic future.

And to truly seize the promise that innovation presents, we must come together and take on one of our most difficult long-standing challenges: New Hampshire’s deteriorating roads and bridges.

The American Society of Civil Engineers gives our roads a C minus, and the I-93 expansion project remains unfinished.

Hundreds of our bridges are on the “red list” of bridges in critical need of repair – risking public safety and our economy.

Just three weeks ago, we all saw the price of years of neglect and under-funding of the highway fund when the Department of Transportation was forced to abruptly close the Sarah Mildred Long Bridge. This comes on the heels of the immediate closure of the Memorial Bridge in 2011.

With the Memorial Bridge already out of service, we were left with only one way to cross the Piscataqua River into and out of Maine, snarling traffic and impeding the flow of goods that is so critical to our economy. In addition, without being able to lift the Long Bridge, oil tankers were stuck in place.

If it weren’t for the quick work of our dedicated public employees at the Department of Transportation, work that was extremely dangerous hundreds of feet above open water in bitter cold and high winds, we might have seen a significant spike in energy prices as our oil supply sat idle on the water.

Maintaining and repairing our state’s roads and bridges and funding transportation projects are crucial for our economy. Creating a solid, modern infrastructure will attract new businesses and industries, while helping our existing businesses grow, transport their goods, and create new jobs.

But as it stands, we barely have enough to do the very minimum: patching roads and bridges together, plowing our highways, and keeping state troopers on the road. Our transportation trust fund faces a $740 million shortfall over the next ten years. There are no more one-time fixes.

We must develop strategies for a long-term solution, for both operations and road construction, and we must do it together, working towards a consensus solution. There have already been proposals offered in both chambers, and I thank Senator Morse and Representative Campbell for the work they have done.

I stand ready to work with any member of either party who is willing to bring constructive, long-term ideas to the table so we can build a consensus solution that will help us begin to improve our roads and bridges and finish I-93.

As you can see, though we continue to recover from the worst of the recession, our challenges are not yet over and they cannot be ignored.

I know we won’t agree on everything, and I am ready to work with you to develop a final budget plan. But let me be clear, we must end this process with a balanced budget, and I will veto anything else.

The fiscally responsible budget I deliver to you today is a difficult budget with difficult choices and shared sacrifice. But it is a balanced budget that relies on conservative revenue growth and responsible decisions.

Most importantly, it is a budget that refocuses our state on the priorities that are critical for driving innovation and strengthening our economy: building a strong, highly skilled workforce ready for 21st century jobs; supporting and attracting growing businesses; and providing the basic support and services that keep our people safe, healthy and productive.

I believe the approach that we have taken puts our state on the right path and will help set the foundation to build a more innovative economy. An economy with more good jobs that can support a growing middle class. And an economy where all of our citizens can share in our success and prosperity.

We cannot ignore our challenges and hope they go away. And we cannot just assume the good jobs of the innovation economy will simply appear if we do not act.

I am ready to roll up my sleeves and work with you, because we have the opportunity and the capacity to build a bright economic future for our people.

We must lead the way and work together to build a stronger, more innovative New Hampshire.